Investing in a soaring stock isn't only about winning in the near term. If the player has a track record of earnings growth and bright future prospects, you actually may miss out if you sell today to lock in a quick gain. Instead, you could score an even bigger victory if you hold on to these players for the long haul and benefit as these companies grow and develop their businesses. How to identify them? They often are leaders in their field, have strong relationships with their customers, and clearly have potential to keep generating growth well into the future.
Two consumer-oriented stocks fit the bill right now. They've climbed in the double digits so far this year but have plenty of room to run over the long haul. And that's why you should consider buying now and holding onto these soaring stocks for the next 20 years. Let's take a closer look at each one.
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Chewy
Chewy (CHWY 2.49%) is the best friend of your furry and not-so-furry friends. The online retailer specializes in everything for your pet, from food and treats to prescription medicine and even health insurance. What I like in particular is most of Chewy's revenue comes from loyal returning customers -- so as investors, we have some visibility on what to expect in the coming quarters.
We know this thanks to Chewy's Autoship service, which automatically reorders your favorite products and sends them to you according to your needs. Quarter after quarter, Autoship sales have represented more and more of the company's total sales -- and in the most recent period, accounted for 80%.
Chewy's grown revenue over time, in recent years reached profitability, and is in solid financial shape with no debt and liquidity of $1.3 billion. This puts Chewy in the perfect position to wisely invest in expansion, which it's doing. The company opened its first international site in Canada, a move that allowed it to leverage its current technology infrastructure without making a massive investment right out of the gate. After one year of operations in Canada, Chewy says the business continues to progress across important metrics like Autoship orders and revenue growth.
NYSE: CHWY
Key Data Points
And Chewy also has recently launched a new business -- veterinary clinics -- in the United States. This is a genius idea because it broadens the revenue stream, with access to a $25 billion market, and offers Chewy the opportunity to introduce its online services to a whole new population of pet owners.
All of this makes Chewy, trading at 30 times forward earnings estimates, a reasonably priced growth stock to buy today.
Costco Wholesale
Costco Wholesale (COST +1.67%) is a company that has what it takes to do well no matter what the general market is doing. This is because the warehouse club offers members fantastic deals on everything from essentials like food and gas to discretionary products. Costco's able to do this because it buys in bulk and then passes the savings on to customers.
But what's even more interesting is how the company generates most of its profit. And this happens before you add the first item to your cart. Costco wins on membership fees, a high-margin business as issuing memberships doesn't add up to much expense for the company. And Costco's high renewal rates -- at more than 90% quarter after quarter worldwide -- mean the company and investors can pretty much count on that income every year.
NASDAQ: COST
Key Data Points
I mentioned how customers turn to Costco for the lowest prices, which are particularly attractive during difficult economic times. Also, during tough economic times, customers will buy as much as possible at Costco to get the most out of their membership.
It's also important to note that Costco has two categories of membership, a standard level for $65 per year and an executive level for $130 per year. Executive membership is growing, up 9% in the recent quarter, and represents more than 46% of paid memberships worldwide and 73% of sales. This shows a large population is willing to spend on a higher level of membership -- and these customers contribute a great deal to revenue.
Costco stock, trading for 59 times forward earnings estimates, isn't cheap. But this stock is worth the premium thanks to its strength through any market environment and the recurrent nature and growth of its membership revenue. And that's why it deserves to be a part of your portfolio for at least the next 20 years.
